Understand the importance of XIRR in mutual funds, how to calculate it, and how it helps you track your investments accurately in the market
India’s mutual fund industry has seen steady growth in recent years. As of February 2025, the Indian mutual fund industry’s assets under management (AUM) crossed a cool ₹64 lakh crore. This growth is largely due to the popularity of systematic investment plans (SIPs) amongst retail investors and a growing awareness of long-term investing. More people are now turning to mutual funds for better, relatively safer gains, but figuring out how much you earn isn't always as simple as it seems.
Knowing the real picture of our investments and returns is important, particularly in an SIP, where your investments happen at different times. That’s where the Extended Internal Rate of Return (XIRR) comes in.
In this post, we’ll explain what XIRR means for you as a mutual fund investor, how it helps make sense of your returns, and why knowing this metric can bring more clarity to your financial decisions.
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Extended Internal Rate of Return, or XIRR, is a way to measure how your mutual fund investment has performed over time, especially when you’ve invested money at different intervals. For example, SIPs have multiple purchase rates and different instalment periods. If you're investing in SIPs, your cash flows aren’t evenly distributed and calculating the final profit can be tricky. XIRR in mutual funds makes simple metrics like CAGR (compound annual growth rate) and ROI (return on investment) less effective, as they consider only a single investment and a fixed holding period.